When you are looking to transfer the ownership of your Whole Life insurance policy to someone else, it is done through an “Absolute Assignment”.We often think of life insurance as a tool to transfer wealth to the next generation at death, but a Whole Life policy can be transferred during one’s lifetime to the next generation.
Depending on whom the policy is transferred to, this transfer might or might not be tax free.
According to today’s tax laws, when a policy is transferred down the family tree (the most typical scenarios are parent to child or grand-parent to grand-child) with no compensation for the transfer, this can happen tax free.
If you transfer your Whole Life policy to a third party, it will probably be considered a full disposition, and most likely will trigger a taxable event.
The definition of child is broad for tax purposes and can be applied in modified circumstances. It is recommended to consult your insurance advisor and a tax professional to confirm before taking any action.
The “Absolute Assignment” is a key component of the “Cascading Life Insurance” concept.